China’s central bank circulated a draft plan to ease restrictions on gold imports, said people with knowledge of the matter, in a move that may lead to lower prices in the world’s biggest market for bullion.
The People’s Bank of China drafted a plan that will open up gold imports to qualified miners as well as all the banks that are members of the Shanghai Gold Exchange, according to the people, who asked not to be identified because the proposal hasn’t been made public. China Gold Coin Inc., a maker of commemorative gold and silver coins, could also qualify to import bullion, they said.
Chinese regulators are pushing to open up the country’s gold trade and lure foreign investors as part of its broader effort to link the mainland to global markets. The country began offering international institutions access to yuan-denominated gold contracts in Shanghai’s free-trade zone in September, a move that may extend its influence over prices while boosting the role of its currency in global trade.
The move may further cut the premium Chinese buyers pay for gold. That spread has averaged $2.74 an ounce so far this year, down from an average premium of $18.75 last year, according to Bloomberg News calculations of the difference between benchmark prices in London and contracts traded on the Shanghai Gold Exchange.
“More importers will level the playing field,” Liu Xu, an independent gold analyst, said by phone. While the move may not lead to more imports, eased restrictions could “erode the premium and benefit Chinese consumers who buy gold,” Liu said.
At the same time, China’s move may eventually spur higher global prices following eased import restrictions in India, the world’s second-biggest gold market, where the central bank on Nov. 28 unexpectedly removed rules requiring importers to sell 20 percent of their shipments to jewelers for re-export. Two days later, Swiss voters struck down a proposal to force the country’s central bank to hold at least 20 percent of its assets in bullion.
The PBOC didn’t respond to a faxed request for comment today. Two phone calls to the Shanghai Gold Exchange went unanswered.
Gold for immediate delivery declined as much as 0.4 percent to $1,204.69 an ounce and was at $1,205.94 at 3:10 p.m. in Singapore, according to Bloomberg generic pricing. Prices reached $1,221.43 on Dec. 1, the highest since Oct. 29
Under the draft, importing licenses would be restricted to miners with a minimum $30 million of overseas investments and gold mine concessions as well as 200 million yuan ($33 million) of registered capital and 10 metric tons of annual mined gold output, the people said.
The changes would “encourage local miners to explore opportunities overseas,” said Wallace Ng, a Shanghai-based trader at Gemsha Metals Co. He said refiners may also benefit.
The PBOC doesn’t publish the names of banks or companies that are currently allowed to import gold. Fifteen banks, including the local units of HSBC Holdings Plc and Australia & New Zealand Banking Group, are approved to import, according to Jiang Shu, senior gold analyst at Industrial Bank Co.
The Shanghai Gold Exchange lists 27 domestic financial institutions as members, including Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd., according to the bourse’s website. The draft proposal didn’t specify whether import privileges will be extended to foreign banking members, which include local units of JPMorgan Chase & Co., Barclays Plc and Credit Suisse Group AG.
Gold purchases in China tumbled 37 percent to 182.7 tons in the three months to September, the World Gold Council said Nov. 13. Chinese government campaigns against corruption and extravagance have hurt the demand for luxury goods, while the slump in gold prices damped interest in holding the metal as an investment.
— With assistance by Feiwen Rong, and Steven Yang